3 ms·
> Still, if PPP GDP increases, with all else being equal (eg. stable population) it would imply the standard of living is increasing. With some important cavea
by Gareth321 3y ago
> Still, if PPP GDP increases, with all else being equal (eg. stable population) it would imply the standard of living is increasing.
With some important caveats:
1. Balance of trade. The goods and services in the poorer nation are worth less, comparatively. Any trade with the richer nation will lead to a wider balance of trade deficit. This causes all kinds of structural economic and budget problems in the long term.
2. Foreign purchasing power. Customers have to substitute goods and services away from the richer nation to poorer nations. If one’s preferred television, for example, is produced in the richer nation, these will become more expensive, and will force consumers to purchase other options. This is especially acute in cases where a nation has a de facto monopoly on certain industries.
In reality, both nominal and PPP GDP figures are important to monitor for different reasons.